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Inside Lowe’s 4Q16 Revenue Outperformance

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Lowe’s 4Q16 performance

For 4Q16, Lowe’s Companies (LOW) has reported revenues of $15.78 billion, which represents a growth of 19.3% from $13.23 billion in 4Q15. Analysts were expecting the company to report revenue of $15.39 billion.

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Factors that drove Lowe’s 4Q16 revenue

Lowe’s 4Q16 revenue growth was driven by its SSSG (same-store sales growth) of 5.1%, its acquisition of RONA, and the one extra week of operation in 4Q16. The one extra week of operations added ~$950 million, contributing 7.1% to sales growth, while the RONA acquisition boosted the 4Q16 revenues by ~$825 million, contributing 6.2% to sales growth. By the end of 4Q16, the company operated 2,129 stores, which is 272 more than its 1,857 in 4Q15.

During the same quarter, international markets also delivered strong sales for the company, with double-digit SSSG in Mexico and mid-single-digit SSSG in Canada in their respective currencies. The company claimed that the acquisition of RONA helped the company in strengthening its relationship with professional customers, which contributed to a rise in revenue from Canada operations.

The rolling out of interior project specialists in all US stores, and the launch of redesigned website lowes.com with refined search algorithms, larger product images, expanded product views, improved products, and content recommendations all contributed to the company’s rise in revenue from omni-channels.

The company’s revenue was also favorably impacted by a rise in the housing price index, higher housing turnover, and the improvement of the American economy. The hurricane Matthew and flooding in Louisiana boosted the company’s lumber and building materials sales.

Peer comparisons

In 4Q16, Home Depot (HD) has posted a revenue growth of 5.8%, while peers Williams-Sonoma (WSM) and Bed Bath & Beyond (BBBY) are expected to post revenue rises of 1.8% and 2.7%, respectively.

Next, we’ll look at Lowe’s same-store sales growth in 4Q16.

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